Partner Content: Peter Hughes, Portfolio Manager of the Life Changing Treatment Strategy at Redwheel, sponsor of the Funds to Watch 2024 event, discusses the team's patients-first approach to healthcare investing and how they see the current climate for healthcare investments.
Can you give a brief overview of your strategy in terms of what you are trying to achieve for investors, your investment process and the make-up of the investment team?
The Redwheel Life Changing Treatments Strategy takes a patients-first approach towards healthcare investing, and we combine our healthcare investing experience and scientific backgrounds to invest globally across the market cap spectrum in companies offering potential life-changing solutions for patients.
We believe several aspects differentiate our strategy from other healthcare-focused strategies:
- A patients-first approach to stock selection.
- Health system strengthening as an investment theme.
- Emerging and developed markets exposure.
Patients first
A key differentiator of our strategy is our patients-first mentality to healthcare investing. We start by looking at patients' problems and then look for the companies with the right solutions. We believe this helps us uncover more commercially successful companies.
We think all healthcare investors should be focused on patients; however, in our view, many investors have become too innovation-focused and fixated on topics like "genomics" and "cell and gene therapy", rather than what matters to patients. Innovation-focused investors start with a solution and then look for a problem to solve. We believe this is backwards logic and not how medicine works in practice.
Health system strengthening
It is widely accepted that many patients globally face barriers in accessing care; we identify and invest behind solutions that can improve a patient's experience of the healthcare system. For example, solutions that drive more rapid diagnosis and tools that uncover new avenues for scientific research and increase healthcare services in low- and middle-income countries.
Emerging markets exposure
Over the next few decades, demand for healthcare is expected to grow globally, with significant demand in emerging markets. We have identified multiple opportunities in low- and middle-income countries and we think the time is right for more investors to consider the healthcare investment opportunities outside of the traditional high income healthcare markets. We believe the time is right for investors to consider the healthcare investment opportunities in these growing markets.
How are you currently positioning your portfolio?
We are significantly exposed to patient-focused healthcare solutions through our strategy's core themes of life-changing drugs, health system strengthening and life-changing care.
Relative to the MSCI AC World Health Care Index, we are overweight medical technology, biotech and emerging market healthcare providers, because this is where we tend to find the most impactful solutions for patients. We are underweight pharmaceuticals and health insurers.
Can you identify a couple of key investment opportunities for your strategy you are playing at the moment in the portfolio? This could be at a stock, sector or thematic level.
Weight loss drugs investor overreaction
We are currently overweight companies that experienced negative investor sentiment surrounding the potential impact of the new weight loss drugs (GLP-1s) on their products. For example, companies selling continuous glucose monitors for diabetes management experienced a decline in stock price over fears that the GLP-1s would reduce prevalence of diabetes. We believe these fears are overblown: a holistic view of patient treatment is needed, and weight loss drugs alone cannot solve the obesity epidemic.
Exposure to expected rebounding demand for healthcare services in low- and middle-income countries
In select markets outside of the traditional high income healthcare markets, we aim to find high quality healthcare providers experiencing strong demand as health systems continue to recover following the COVID-19 pandemic. There are significant backlogs of patients needing treatment who had operations postponed during the pandemic. We have exposure to high quality healthcare providers in countries with below average numbers of hospital beds and strong referral networks to attract patients.
Peter Hughes is the Portfolio Manager of the Redwheel Life Changing Treatments Strategy
Key Information
No investment strategy or risk management technique can guarantee returns or eliminate risks in any market environment. Past performance is not a guide to future results. The prices of investments and income from them may fall as well as rise and an investor's investment is subject to potential loss, in whole or in part. Forecasts and estimates are based upon subjective assumptions about circumstances and events that may not yet have taken place and may never do so. The statements and opinions expressed in this article are those of the author as of the date of publication, and do not necessarily represent the view of RWC Partners Limited or of its group Redwheel. This article does not constitute investment advice and the information shown is for illustrative purposes only and is not intended to be, and should not be interpreted as, recommendations or advice.
DISCLAIMER
The statements and opinions expressed in this article are those of the author as of the date of publication, and do not necessailty represent the view of RWC Partners Limited or of its group companies (together "Redwheel"). Past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested. This article does not constitute investment advice and the information shown above is for illustrative purposes only and should not be construed as a recommendation or advice to buy or sell any security. No investment strategy or risk management technique can guarantee returns or eliminate risks in any market environment.
This is article is sponsored by Redwheel
